Last week, India’s executive branch passed the historic National Food Security Bill (NFSB), an act that will dramatically increase the number of people who receive food subsidies from the government. While India’s existing food distribution system, the Targeted Public Distribution System (TPDS), is already enormous, the NFSB proposes to increase coverage to 75% of India’s rural population and 50% of the urban population – a whopping 800 million people. At face value, the bill appears to be an important step in India’s fight against hunger, but much debate still exists regarding whether the bill’s flaws outweigh its benefits and whether the program will be sustainable in the long run.
The NFSB aims to simplify how food subsidy beneficiaries are identified, viewing households as either covered or uncovered based on data provided by the states. Whether or not a household is covered is determined based on a national cutoff-level for per capita consumption. Covered households will receive an entitlement of 5 kg per person per month of wheat and rice for the price of Rs. 2 and 3 per kg, respectively. Coarse cereals, including sorghum and pearl millet, will be sold at Rs. 1 per kg. Extremely poor households, currently classified as Antyodaya Anna Yojana (AAY), will receive an additional 10 kgs of grain per household. The bill, which is a revision of previous proposals, also includes an additional allocation of 6.5 million tons of food grains for other welfare schemes, such as school feeding programs and additional subsidies for pregnant women. All told, the NFSB will provide 61.2 million tons of food grains per year throughout India.
Clearly, such a wide-reaching program will have significant financial costs. A conservative estimate places the bill’s costs at over 23 billion dollars a year, equivalent to about 0.72 percent of India’s GDP. These costs don’t just come from the grains themselves: setting up and maintaining distribution centers and government agencies to monitor the subsidies also creates a big expense. Critics of the bill argue that this money could be better spent on generating employment, improving rural and urban infrastructure, investing in agriculture, and a number of other competing uses.
Another point of contention between the NFSB’s critics and supporters is the household identification system itself. While the system will generally expand the number of households who receive grain entitlements, it can have varying impacts on individual households. The existing TPDS system has three classifications: households above the poverty line (APL), households below the poverty line (BPL), and extremely poor households (AAY). All AAY households will remain covered with essentially the same benefits under the new system, but 62 percent of households currently classified as BPL will see a 2 kg reduction in their monthly entitlement. While they will receive 5 kgs at a lower price than they do currently, the reduction in quantity will outweigh the reduction in price for many of these households. The impact on APL households is also mixed: while 71 percent of households currently classified as being above the poverty line will move into the new covered category (meaning both a 2 kg increase and a reduction in price from their current entitlement), the rest will move into the uncovered category. Analysis (forthcoming in Economic and Political Weekly ) suggests the following breakdown: of the households currently covered under the TPDS, 46 percent will be better off under the NFSB, 14 percent will remain in their current condition, and 40 percent will actually be worse off.
Implementation also poses a significant challenge to the NFSB and will require careful attention at both the national and state levels. Storage, transportation, and distribution infrastructure and systems need to be improved in many parts of the country in order to prevent grain from going bad before it reaches the people who need it. Food safety and malnutrition due to micronutrient deficiency rather than simple caloric intake are also overlooked by the bill; these issues will need to be addressed in order to improve India’s food security in the long run.
As the NFSB made its way through various levels of the Indian government, several political challenges became clear. The first is the potential incompatibility of the NFSB with existing state programs. Many states in India have tried to implement their own food distribution policies. In states that have already successfully implemented the TPDS system, such as Tamil Nadu, Andhra Pradesh, and Chattisgarh, the new system will not have significant impacts; in fact, the national government could see political pushback from these states, which may want to protect their already-functioning systems. While the NFSB proposes a grievance redressal system, through which households can fight for increased access, weak infrastructure and political institutions in many parts of the country make the success of such a system somewhat doubtful. The second political challenge is the NFSB’s potential incompatibility with other development programs, such as a proposed cash transfer program for food and fertilizers. While this program has been tabled for now, it is unclear how cash transfers and food subsidies could impact each other, and India’s economy, in the future.
Finally, the NFSB has several implications for India’s agricultural sector. Providing food subsidies to more people means that more grain will be needed; it is likely that in order to procure the needed additional grain, the government will have to raise its minimum support price, potentially leading to higher food inflation. Farmers’ production choices may also be affected by the NFSB; with increased demand for staples like wheat and rice, farmers may choose to invest more in these crops rather than in other (potentially higher value) crops, leading to a decrease in agricultural diversification towards high-value agriculture. In addition to its potential economic and nutritional impacts, an increased focus on just a handful of crops can also have environmental effects: for example, the Punjab faces water scarcity and thus is not ideally suited for persisting rice production, but it may be tempted to continue increasing rice production in order to take advantage of the increased demand and higher government payments.
All in all, the NFSB is a complicated program that could impact many aspects of India’s economy and food security. While time will tell if the program’s benefits are extensive enough to outweigh its flaws, it is crucial for India’s policymakers to acknowledge and address those flaws in order to truly benefit the country as a whole. Proper targeted implementation remains the key to achieving any significant impact on food security for India’s poor, with or without the NFSB. Unfortunately this is one area in which the record of social safety net programs in India has much room for improvement.
Read the entire bill and analysis.
Read an interview from IFPRI's Director for South Asia, PK Joshi.
August 27 Update : The lower house of the Parliament of India, the Lok Sabha, has passed the National Food Security Bill. The bill has yet to make its way through the upper house. Below are the most recent news articles relating to the passage of the NFSB.
Lok Sabha Passes Food Security Bill - The Hindu
Food Security Bill Passed in Lok Sabha after Nine-Hour Debate - FirstPost
Lok Sabha Passes Food Security Bill - Business World
Lok Sabha Approves UPA's Landmark Food Security Bill with Amendments - India Today